There will come a time, perhaps sooner than you think, when it seems very quaint that people used to park their cars indoors. Because Britain's garages – at least the ones still being used as garages – are dying out. Today just 34% of the 9.3m out there are reckoned still to have cars inside, with 12% already or about to be converted for some entirely different purpose.

At the same time, the Home Builders Federation says fewer and fewer new garages are being built. Mostly, this is because of increased demand for flats and townhouses, which seldom come with one anyway. But even when a garage is included with a new house, this is often done to satisfy a local authority's two-space rule, rather than because buyers actually want an extra building to put their car in.

When you think about it, why would they? "You have to remember that 50 years ago every car leaked, so if you didn't keep it in a garage it would soon be like a compost heap inside," says Sarah Beeny, host of Channel 4's Property Ladder, founder of the DIY estate agents Tepilo, and a secret garage "obsessive". "But cars no longer leak. So I don't know why you'd need to keep one under cover, really."

Security would once have been a reason, as would protection from the elements in winter, but improvements in vehicle design mean these are less important factors now. And besides, modern cars – notably 4x4s – are larger, which often makes the question academic, as they cannot fit into many existing garages unless the driver is happy to leave them via the sunroof.

This may change again, of course, if a new generation of smaller electric cars needs nightly plugging-in. But for now, those people who still take the trouble to manoeuvre their car into its little home are surely doing so more for a feeling of comfort than any practical purpose. "It's a slightly generational thing," Beeny says. The garage has become the architectural equivalent of the tea cosy, in other words, and every bit as hip.

But then, garages have long been celebrated for their alternative uses. In the US, in particular, they have a very noble history, having incubated the origins of Disney, Hewlett Packard, Motown, Apple, Google and many other famous companies. And in this more densely populated country, it has become increasingly difficult to justify 200sq ft of car and tool storage when you might instead create an office, a studio flat, a gym, a playroom, or somewhere else that people actually spend time.

"All of this is just a reflection of the fact that we're short on space," says Beeny. "Per square foot, it's a big luxury to have an entire garage storing one lawnmower. And it's an amazing opportunity. A garage is an empty box to work with, so you can go a bit mad if you fancy it." And some people, once their car is out of the way, certainly have.

The brewery, Dorset

Paul Smith in his microbrewery/garage Photograph: Sam Frost

When Paul Smith and his wife bought their house 20 years ago, the garage was all-important. Not for Paul's hobbies – though as a radio ham, DIY enthusiast and amateur mechanic, he had many of them – but for his work. If the head of winter service for Wiltshire highway maintenance can't use his car on a freezing morning, then nor can thousands of others. "We protect our gritters by parking them away," Smith says, "so I just got used to that, and making sure I'm always available, with a car that is going to go."

Last month, however, Smith retired. And for the last five years his garage has been devoted to a hobby, which he quickly found was thirsty for space. "The brewery is not that large," he says sheepishly. "But when you spread stuff around, and you have to store malt and barley and hops and things, it all takes up room. I haven't parked my car in there for a long time." Will it go in this winter? "I'll have to shift a lot of things around," he says. We'll take that as a no then? "That's right."

Before condemning Smith for his sprawl, take note of his achievements: for less than £5,000, he has set up a fully operational duty-paying, profit-making commercial brewery. And he has done this single handed, including all the extra plumbing and electrical work, in his garage. "I nearly didn't allow enough room," he chides himself, remembering, ­"because I suddenly realised: fermenters, crikey! And then there's barrels, and I've got two extra-large fridges in there as well."

To the untrained eye, it certainly looks like a mighty operation. Yet when Smith comes down to brew here on a Monday morning, he produces just two firkins of beer, or roughly 144 pints. "Which is about as tiny as you can get," he explains. "I tend to refer to it as a 'nano-brewery'." As a man of leisure, he now finally has time to increase capacity, and start brewing weekly instead of fortnightly. But this, he promises, will be the limit. "I don't want to go silly with it, I'm not looking for another full-time job," he says. "It would need a lot of investment, and I think breweries fail purely because of that. I'm going to stay in my garage."

The home cinema, Worcester

The £150,000 home cinema

All I can tell you about this 56-year-old company director from Worcester is that he has a truly astonishing garage, and he does not want it to be burgled. "I try and keep it away from as many people as I can," he says, explaining that even his name might be enough to help a resourceful criminal track down his home. "But I enjoy talking about it," he adds quietly, "because I love what I've done." Which is a good thing, considering it cost £150,000.

He moved into his new house last August with his partner and her three daughters. They planned a large extension on the main building, centring on a family room with no TV. "It's a really nice adult area," he explains, "so I wanted to make the television room something special for the girls." It is fair to say he managed it.

Normally this type of conversion would be called a "home cinema", although in this case the word "cinema" seems more appropriate. "There are five massive speakers set behind the screen, and four rear in-ceiling speakers down the room. The sound is quite scary, actually." And dare I ask how big the screen is? "It's 8ft." That's gigantic. "It is, yes. One of the electricians said to me, this is as big as the cinema in Malvern."

The actual construction was handled by a specialist company, which added a facility for games consoles, reclining leather seats, carpeted walls, heaters and a single remote control for everything, including the lights. They also designed the room, albeit not without debate. "I didn't like the colour scheme when their designer put it on the chart," the director says. "And when he told me we were going to have 'aubergine' and 'mustard', I said, 'Not in my garage you're not.' But in the end I gave in and let him have his way. And it does look fantastic. No question."

The doll house workshop, Doncaster

Lorna Payne has converted her garage into a doll house workshop Photograph: Christopher Thomond

Lorna Payne cannot explain why, in her middle years, she was suddenly gripped by a passion for making doll houses. "I don't think I was a deprived child. I just had this bee in my bonnet, so I bought a kit and made it. I'd never touched a piece of wood before, and never stopped since." This was in 1990, shortly before she retired from the probation service, and before long her hobby was proving almost as demanding as her work.

"I was running these [craft] courses down south, and really enjoying them," she says, "but it was such a hassle. It was a day to fill the car with all my stuff beforehand, a day to empty it when I got back. God, it was a killer." Her husband Steve thought he had found the answer when he came home one day and announced he had been looking at a new estate car – but Payne had other ideas. Why could the students not come to her? The builders next door might be able to give them a quote to extend the garage, Steve pointed out. "And before the words were out of his mouth, I was over there," Payne says.Now, what was once a little workshop and a large garage has become a little workshop and an enormous classroom, where up to a dozen novice miniaturists can whittle happily together. "I had to apply for planning permission to make it into what they called an 'educational area'," Payne recalls.

Even so, the conversion is nothing fancy: some plywood units round the walls, carpeting, and a large curtain draped across the doors. "So that you can't actually see it's a garage," Payne explains. The job was finished in 1994, and she has never been short of paying pupils since. "People can bring their doll houses, build them, electrify them, decorate them, make furniture for them, anything," she says gleefully. "I also have tutors in, and they run what I call specialist courses, in things like cold porcelain flowers."

The new workshop also serves as a display area for some of Payne's own miniature scenes, such as the ever-popular "scruffy back yard", which craft clubs and acquaintances often visit her to view. And Steve no longer hankers after that estate car, as his wife's hobby also brings in plenty of visitors to enjoy his cooking. "Sometimes a husband and wife will come, sometimes husbands on their own. So he chats with them and just enjoys the company really. We don't only get old ladies, you know."

The model railway, Southampton

Dermot Stephens has a train set in his garage Photograph: David Mansell

"I was always going to put a railway in there," says Dermot Stephens, a 46-year-old tax manager, "but I would never have admitted that up front." What was clear, however, when he and his wife Helen moved into their new home seven years ago, was that its narrow, cold and leaky garage was going to have to be converted into something.

"It was a wooden one," Stephens says, "which had big double doors and an asbestos roof, so God knows how old it was. It even had an inspection pit dug into the ground so you could get underneath cars. But to us it was just a draughty 10ft by 30ft space with a hole in the middle."

Stephens had always been keen on DIY, however, so as soon as the couple moved in, he got to work. "The official plan," he remembers, "was that I would make a utility room, and then create storage down the other end." This he duly did, lining and waterproofing the garage, fitting a new roof (with help), erecting a dividing wall to create a space 10ft square, which he then rewired and plumbed in its entirety, with a sink, washing machine and tumble dryer. "I was making it up as I went along, really – it was a bit of an adventure, and that was part of the appeal. The electrics I looked up on the internet. It's just trial and error – without killing yourself. But it took months and months and months, because I didn't know what I was doing."

Fortunately, Helen approved. "She probably didn't expect me to do such a good job with it, if I'm being modest." So, banking the approval, he pressed on with the other (much larger) room, where – lo and behold! – a model railway soon appeared. "She probably knew in the back of her mind that I would do that anyway," he admits. "It's slightly sad, but there you go."

In fact, as railway modellers go, Stephens is far from the most obsessive. On average, he reckons he only works on his for an hour or two every fortnight. "I just don't get the time really," he sighs. "I'm not a real model railway nerd, where everything is so particular and it's got to be exactly 'the truth'. I make it up as I go along because I quite enjoy making things, rather than [copying] the ins and outs of a specific railway."

Even so, Stephens's larger handiwork commands respect. Such is the transformation, in fact, that these days no one thinks of it as a garage any more. "It usually known as 'my shed'," Stephens says. "And the other end, I call my wife's 'shed'." He pauses. "She's not so happy about that."